Account 353- Bonus and welfare fund

1.Accounting Principles

a) This account is used to record the current amounts, increase, decrease situation of bonus and welfare fund and reward fund of the executive management board of enterprises. Bonus and welfare funds are deducted from post-corporate income tax profits of enterprises to use for reward and encouragement of physical benefits, serving the needs of public welfare, improvement and enhancement of the standard of physical and spirit life of workers.

b) The setting up and using the bonus and welfare fund and reward fund of executive management board of company must comply with current financial policies. c) Bonus and welfare fund and reward fund of executive management board of company must be accounted for detailed according to each type of fund.

d) For fixed asset invested, purchased by welfare fund completed and used in manufacturing, trading, accountants record an increase in fixed assets as well as an increase in owner‘s capital and a decrease in welfare fund.

dd) For fixed asset invested, purchased by welfare fund completed and used for needs of cultural and welfare of enterprises, accountants record an increase in fixed assets and simultaneously transfer from the welfare fund (Account 3532) to welfare funds that form fixed assets (account 3533). The fixed assets shall not be deducted depreciation of fixed assets from expense monthly, at the end of the accounting year, depreciation of fixed assets shall be calculated once / year to record a decrease in welfare funds that form fixed assets.

2.Structure and contents of account 353- Bonus and welfare fund

Debit side:

- Expenses of bonus and welfare fund and reward fund of executive management board of company;

- Decrease of welfare fund that forms fixed assets when calculating the depreciation of fixed assets or the sale or liquidation, insuffient detection during inventory of fixed assets;

- Investment and purchase of fixed assets by welfare fund completed and used for needs of cultural and welfare;

- Allocation of bonus and welfare fund to subordinates.

Credit side

- Setting up bonus and welfare fund and reward fund of executive management board of company from post-corporate income tax profits;

- Bonus and welfare fund allocated by superiors;

- Welfare fund that forms fixed assets increased due to investment, purchase of fixed assets by welfare fund completed and put into use in production, trading or cultural and welfare activities.

Credit balance: The remaining bonus and welfare funds of enterprises.

Account 353- Bonus and welfare fund comprises 4 sub-accounts:

- Account 3531 –Bonus fund: Records the current situation, setting up and use of bonus fund of enterprises.

- Account 3532 – Welfare fund: Records the current situation, setting up and use of welfare fund of enterprises.

- Account 3533 - Welfare fund that forms fixed assets: Records the current amounts, increase or decrease situation of welfare fund that forms fixed assets of enterprises.

- Account 3534 – Reward fund of executive management board of company: Records the current amounts, setting up and use of reward funds of executive management board of company.

3.Method of accounting for several major transactions

a) In year, when deducting from bonus and welfare fund, record:

Dr 421 - Undistributed post-tax profits

Cr 353 - Bonus and welfare fund (3531, 3531, and 3534)

b) At the end of the year, determining bonus and welfare fund deducted additionally, record:

Dr 421- Undistributed post-tax profits

Cr 353 - Bonus and welfare fund (3531, 3532, and 3534)

c) Calculating the bonuses paid to employees and other workers in enterprises, record:

Dr 353 - Bonus and welfare fund (3531)

Cr 334 - Payable to employees.

d) Using welfare fund for subsidizing difficulties and expenditures for employees and workers on vacation, expenditures for culture public culture and performance movement, record:

Dr 353 - Bonus and welfare fund (3532)

Cr 111, 112.

dd) When selling products, goods covered by bonus and welfare fund, accountants must record revenues excluding VAT payable, record:

Dr 353 - Bonus and welfare fund (total payment)

Cr 511 - Revenue from goods sale and service provisions

Cr 3331 - VAT payable (33311).

e) When superiors allocate bonus and welfare fund for subordinate units, record:

Dr 353 - Bonus and welfare fund (3531, 3532, and 3534)

Cr 111, 112.

g) Bonus and welfare fund allocated by superior units, record:

Dr 111, 112...

Cr 353 - Bonus and welfare fund (3531, 3532).

h) Using welfare fund to support for disaster, fire, charity expenses ... record:

Dr 353 - Bonus and welfare fund (3532)

Cr 111, 112.

i) When investing, purchasing fixed assets completed by welfare funds and put into use for the purpose of culture, welfare of enterprises, record:

Dr 211 - Tangible fixed assets (cost)

Dr 133 - Deductible VAT (if any)

Cr 111, 112, 241, 331,…

If the input VAT is not deducted, historical costs of fixed assets include VAT

Also are recorded:

Dr 3532 - Welfare fund

Cr 3533 - Welfare fund that forms fixed assets.

k) Periodically, calculating the depreciation of fixed assets invested, purchased by welfare fund, used for needs of culture and welfare of enterprises, record:

Dr 3533 - Welfare fund that forms fixed assets.

Cr 214 - Depreciation of fixed assets.

l) When selling or liquidating fixed assets invested, purchased by welfare fund, used in cultural and welfare activities:

- Recording a decrease in asset sold or liquidated:

Dr 3533 - Welfare fund that forms fixed assets (remaining value)

Cr 214 - Depreciation of fixed assets (depreciation value)

Cr 211 - Tangible fixed assets (cost)

- Recording the revenues and expenditures of sale or liquidation of fixed assets:

For expenditures, record:

Dr 353 - Bonus and welfare fund (3532)

Dr 133 - Deductible VAT (if any)

Cr 111, 112, 334,…

For revenues, record:

Dr 111, 112

Cr 353 - Bonus and welfare fund (3532).

Cr 3331 - VAT payable (if any ).

m) Accountants transfer assets which are the welfare projects: In case of transfer of housing of officers, employees invested with corporate bonus and welfare funds for local housing agencies to manage, record:

Dr 3533 - Welfare fund that forms fixed assets (remaining value)

Cr 214 - Depreciation of fixed assets (depreciation value)

Cr 211 - Tangible fixed assets (cost)

n) In case enterprise owners decide to reward Board of directors from reward fund of executive management board of company, record:

Dr 353 - Bonus and welfare fund (3354)

Cr 111, 112...

o) In case of a joint stock company which is entitled to issue bonus shares from the reward fund to increase owner‘s capital, record:

Dr 3531 – Reward fund

Dr 4112 - Share premium (selling price lower than par value)

Cr 4111- Contributions from owners

Dr 4112 - Share premium (selling price higher than par value)

p) Accountants settle the balance of reward fund and bonus and welfare fund before valuating enterprises in equitization of 100%-state-owned enterprises.

- When transferring the balance of bonus and welfare fund paid for employee‘s specific identification in the list of enterprises at the time of equitization, record:

Dr 353 - Bonus and welfare fund (3531, 3532)

Cr 334 - Payable to employees.

- When paying for workers from bonus and welfare fund for workers, record:

Dr 334 - Payable to employees.

Cr 111, 112.

- If enterprises have overspent of bonus and welfare fund (account 353 with debit balance), settlement shall be as follows:

Sum paid directly to employees named in the regular list at the time of the decision on equitization must be recovered before selling preference shares, record:

Dr 138 - Other receivables

Cr 353 - Bonus and welfare fund (3531, 3532).

Sum paid out, spent on donations or retired workers lost their jobs before the decision on equitization of enterprises and settled like unrecoverable receivables by enterprise value decision agency, record:

Dr 111, 112, 334 (indemnity by organizations and individuals)

Dr 642 - Enterprise administrative expense

Cr 353 - Bonus and welfare fund

Source: Circular 200